Structural Loopholes in Sustainability-Linked Bonds:
Sustainability-Linked Bonds-an innovative debt product that incorporates incentivized sustainability targets-are becoming increasingly popular to encourage issuers to improve their sustainability performance. However, existing Sustainability-Linked Bond structures allow issuers to weaken the link be...
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| Format: | Elektronisch E-Book |
| Sprache: | English |
| Veröffentlicht: |
Washington, D.C
The World Bank
2022
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| Schlagworte: | |
| Online-Zugang: | Volltext |
| Zusammenfassung: | Sustainability-Linked Bonds-an innovative debt product that incorporates incentivized sustainability targets-are becoming increasingly popular to encourage issuers to improve their sustainability performance. However, existing Sustainability-Linked Bond structures allow issuers to weaken the link between sustainability and financial outcomes, rendering Sustainability-Linked Bonds less effective. This paper examines two potential structural loopholes on this front: late target dates and call options. The results show that Sustainability-Linked Bonds with coupon step-up penalties, which constitute the majority and benefit most from such features, are more likely to have later target dates and call options embedded. Larger penalties are associated with a greater likelihood of late target dates but not call options, which instead tend to be favored primarily by speculative grade issuers. The paper also provides evidence that issuers with high carbon dioxide emissions are more likely to resort to such structural loopholes. These findings suggest that Sustainability-Linked Bonds, despite incentivized targets, may be prone to greenwashing |
| Beschreibung: | 1 Online-Ressource (29 Seiten) |
| DOI: | 10.1596/1813-9450-10200 |
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| 520 | 3 | |a Sustainability-Linked Bonds-an innovative debt product that incorporates incentivized sustainability targets-are becoming increasingly popular to encourage issuers to improve their sustainability performance. However, existing Sustainability-Linked Bond structures allow issuers to weaken the link between sustainability and financial outcomes, rendering Sustainability-Linked Bonds less effective. This paper examines two potential structural loopholes on this front: late target dates and call options. The results show that Sustainability-Linked Bonds with coupon step-up penalties, which constitute the majority and benefit most from such features, are more likely to have later target dates and call options embedded. Larger penalties are associated with a greater likelihood of late target dates but not call options, which instead tend to be favored primarily by speculative grade issuers. The paper also provides evidence that issuers with high carbon dioxide emissions are more likely to resort to such structural loopholes. These findings suggest that Sustainability-Linked Bonds, despite incentivized targets, may be prone to greenwashing | |
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| illustrated | Not Illustrated |
| index_date | 2024-07-03T22:27:56Z |
| indexdate | 2025-02-20T07:20:17Z |
| institution | BVB |
| language | English |
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| physical | 1 Online-Ressource (29 Seiten) |
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| publishDate | 2022 |
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| publisher | The World Bank |
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| spellingShingle | Ul Haq, Imtiaz Structural Loopholes in Sustainability-Linked Bonds Bond Grade Issuers Bonds Debt Markets Emerging Markets Environment Finance and Financial Sector Development Green Issues Greenwashing International Financial Markets Late Date Penalty Private Sector Development Private Sector Sustainability Securities Markets Policy and Regulation Sustainability Performance Targets Sustainability-Linked Bonds |
| title | Structural Loopholes in Sustainability-Linked Bonds |
| title_auth | Structural Loopholes in Sustainability-Linked Bonds |
| title_exact_search | Structural Loopholes in Sustainability-Linked Bonds |
| title_exact_search_txtP | Structural Loopholes in Sustainability-Linked Bonds |
| title_full | Structural Loopholes in Sustainability-Linked Bonds Imtiaz Ul Haq |
| title_fullStr | Structural Loopholes in Sustainability-Linked Bonds Imtiaz Ul Haq |
| title_full_unstemmed | Structural Loopholes in Sustainability-Linked Bonds Imtiaz Ul Haq |
| title_short | Structural Loopholes in Sustainability-Linked Bonds |
| title_sort | structural loopholes in sustainability linked bonds |
| topic | Bond Grade Issuers Bonds Debt Markets Emerging Markets Environment Finance and Financial Sector Development Green Issues Greenwashing International Financial Markets Late Date Penalty Private Sector Development Private Sector Sustainability Securities Markets Policy and Regulation Sustainability Performance Targets Sustainability-Linked Bonds |
| topic_facet | Bond Grade Issuers Bonds Debt Markets Emerging Markets Environment Finance and Financial Sector Development Green Issues Greenwashing International Financial Markets Late Date Penalty Private Sector Development Private Sector Sustainability Securities Markets Policy and Regulation Sustainability Performance Targets Sustainability-Linked Bonds |
| url | https://doi.org/10.1596/1813-9450-10200 |
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